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En Banc Sixth Circuit Court Sends Back Michigan Case on Emergency Cuts to Retiree Health Benefits

"[T]he full court (like the prior panel) vacated the district court's decision to deny the retirees a preliminary injunction and remanded for further review. This time, however, the Sixth Circuit eschewed Michigan law, noting that the parties and district court 'need not focus on the state-law issues presented to this court en banc.' Instead, the Court emphasized the potential impact of several federal authorities, including the Bankruptcy Code, the Contract Clause, and the Due Process Clause." [City of Pontiac Retired Employees Ass'n v. Schimmel, No. 12-2087 (6th Cir. May 5, 2014)]

A Take-Away from the Quality Stores Decision

"Quality Stores tried to argue that the payments should not be considered 'employee' wages that are subject to FICA tax because they were made after termination of employment. The Supreme Court flatly rejected that argument, essentially relying on a simple rationale that payments to former employees have the employment relationship as their genesis.... In various circumstances, employers have taken, and may currently be taking, positions that certain types of employee-related payments are not subject to FICA tax (e.g. contract terminations or signing bonuses). If so, employers should revisit those positions."